Answer:
1. C) $166,000
2. B) $248,000
Explanation:
Given the forecast
Month July August September October
Cash sales $80,000 $70,000 $50,000 $60,000
Credit sales $240,000 $220,000 $180,000 $200,000
Given that for credit sales, the regular pattern of collection is 20% in the month of sale, 70% in the following the month of sale and the remainder in the second month following the month of sale.
Account receivable balance is made up of credit sales yet to collected.
The budgeted accounts receivable balance on September 30
= 10% * $220,000 + 80% * $180,000
= $22,000 + $144,000
= $166,000
The budgeted cash receipts for October
= $60,000 + 20% * $200,000 + 70% * $180,000 + 10% * $220,000
= $60,000 + $40,000 + $126,000 + $22,000
= $248,000
